RCB sells 20% stake to Otkri­tie FC Bank

RCB Bank Ltd., the Li­mas­sol-based ‘sys­temic’ bank that passed the re­cent ECB cap­i­tal strength tests with fly­ing colours, has raised $124.2 mln in fresh eq­uity by sell­ing a 19.85% stake to Otkri­tie Fi­nan­cial Cor­po­ra­tion Bank, the sec­ond largest pri­vately owned and sixth largest bank in Rus­sia.

After the deal, Rus­sia’s VTB Group has re­duced its stake to 46.29% and RCB Bank is no longer a sub­sidiary bank, even though VTB also main­tains a mi­nor­ity stake in the par­ent Otkri­tie Hold­ing. Since 1997, Otkri­tie has also had a pres­ence in Cyprus through its fi­nan­cial ser­vices and bro­ker­age firm, Otkri­tie Fi­nance (Cyprus) Limited.

The new deal has boosted RCB’s as­sets to over $9 bln with first-half prof­its at $36 mln and eq­uity ex­ceed­ing $500 mln.

“How­ever, our de­vel­op­ment plans on the lo­cal and in­ter­na­tional mar­kets im­ply an ac­tive as­sets growth, which re­quired both the ex­pan­sion of the cap­i­tal base and the num­ber of strate­gic part­ners,” Zi­marin said in a state­ment.

“Our new share­hold­ers have ex­ten­sive ex­per­tise in de­vel­op­ing lend­ing projects for small and medium-sized busi­nesses, as well as in the suc­cess­ful im­ple­men­ta­tion of re­tail projects and high-qual­ity in­vest­ment bank­ing ser­vices. The at­trac­tion of Otkri­tie FC Bank into the eq­uity of RCB Bank Ltd. will un­doubt­edly con­trib­ute to the fur­ther de­vel­op­ment of Cyprus as an in­ter­na­tional fi­nan­cial cen­tre in Europe, and will also pro­vide an ad­di­tional im­pulse to RCB Bank’s dy­namic growth”, Zi­marin added.

Last week, Moody’s In­vestors Ser­vice up­graded RCB Bank’s de­posit rat­ings to Caa1 from Caa2 with a ‘sta­ble’ out­look, fol­low­ing the rat­ing agency’s up­grade of the Cyprus’ gov­ern­ment bond rat­ing to B3 from Caa3 and the sub­se­quent rais­ing of Moody’s de­posit ceil­ing in Cyprus to Caa1 from Caa2.

VTB cur­rently orig­i­nates, funds and guar­an­tees the majority of RCB’s loans, in ad­di­tion to main­tain­ing a high level of over­sight, Moody’s said.

Fur­ther­more, de­spite this strong link­age with VTB, the rat­ing agency also con­sid­ers that this as­so­ci­a­tion will likely weaken go­ing for­ward, in light of both VTB’s planned di­vest­ment from RCB Bank through a cap­i­tal in­crease, which will de­crease its stake to 46.29% from 60% cur­rently, as well as the 38% con­trac­tion in RCB Bank’s bal­ance sheet in 2013.

As of De­cem­ber 2013, the bank re­ported a Tier 1 ra­tio of 16.78%, more than twice the min­i­mum re­quire­ments, which en­abled it to pass the Euro­pean Cen­tral Bank’s com­pre­hen­sive as­sess­ment with fly­ing colours. Cash col­lat­eral also im­proves the bank’s as­set qual­ity with im­paired loans ac­count­ing for 0.53% of gross loans. RCB Bank’s fund­ing and liq­uid­ity pro­files also ben­e­fit from sta­ble fund­ing pro­vided by Bank VTB.

Moody’s said up­ward pres­sure on the bank’s de­posit rat­ings could de­velop if the de­posit ceil­ing in Cyprus is fur­ther raised. Over the longer term, pos­i­tive pres­sure could de­velop on RCB Bank’s BCA if the bank strength­ens its fran­chise out­side the VTB group while main­tain­ing its strong fi­nan­cial pro­file.

“We are sat­is­fied with the re­sults. Suc­cess in pass­ing the stress tests demon­strates that RCB Bank has re­tained sta­bil­ity and is a re­li­able part­ner for its clients. The avail­abil­ity of sig­nif­i­cant cap­i­tal re­serves will en­able the bank to im­ple­ment its plans on in­ter­na­tional business de­vel­op­ment, as well as to boost its lend­ing to Cypriot com­pa­nies and ex­pand its business in Cyprus,” Zi­marin had said after the stress test re­sults.